In Re Gol Linhas Aéreas Inteligentes S.A., et al.

Background

GOL Linhas Aéreas Inteligentes S.A., a Brazilian airline, and affiliated debtors filed for Chapter 11 bankruptcy protection in the Southern District of New York on January 25, 2024. The debtors reported approximately $4.1 billion in outstanding debt, including approximately $2.2 billion secured by their assets.

The debtors’ reorganization plan included a third-party release. The release purported to discharge claims that creditors and certain related parties might have against the debtors, reorganized debtors, lenders, noteholders, trustees, agents, and other parties connected with the bankruptcy and related transactions. The plan treated many creditors as having agreed to the release unless they affirmatively opted out.

Creditors eligible to vote received ballots containing an opt-out checkbox. Creditors with unimpaired claims who were not eligible to vote received notices and opt-out forms. Of the 617 returned voting ballots, 323 opted out. Of the 14 returned notices sent to nonvoting creditors, 11 included an opt-out. The plan’s confirmation order also included an injunction that would prevent actions enforcing released claims against the released parties after the plan became effective.

The United States Trustee objected to the releases and related injunction. The Bankruptcy Court overruled the objection and confirmed the plan on May 21, 2025. It concluded that federal law governed whether the releases were consensual and that creditors had impliedly consented because they had participated in the bankruptcy process, the claims affected the bankruptcy estate, and the creditors received adequate notice and an opportunity to opt out.

Appeal and arguments

The United States Trustee appealed the Confirmation Order. The Trustee argued that the Bankruptcy Court should have applied state contract law and that, under state law, creditors’ failure to opt out did not establish consent. The Trustee also argued that the opt-out process was insufficient to imply consent even under federal law.

The debtors argued that federal law governed and that the creditors who did not opt out had consented. They also argued, alternatively, that state-law exceptions, the creditors’ opportunity to decline the releases, and the consequences of failing to respond supported finding consent. An ad hoc group of noteholders and lenders joined and adopted the debtors’ arguments.

Court’s analysis

The Supreme Court held in Harrington v. Purdue Pharma L.P. that the Bankruptcy Code does not authorize a Chapter 11 plan to release claims against a nondebtor without the affected claimants’ consent. The Supreme Court did not decide what qualifies as a consensual release.

Judge Cote concluded that it was unnecessary to decide whether state or federal law controlled because both systems applied the same general contract principle: consent ordinarily cannot be inferred from silence. Under New York law, a binding contract requires an objective indication of agreement through words or conduct, and silence generally is not acceptance unless particular circumstances exist, such as a duty to respond or a contemporaneous oral agreement. The debtors conceded that the creditors had no duty to respond and did not identify a contemporaneous oral agreement.

The court also rejected the debtors’ federal-law arguments. Consent to a bankruptcy court’s jurisdiction did not necessarily mean consent to every release the court might approve. The class-action opt-out model did not apply because the creditors were not members of a certified class governed by the procedures and safeguards of Federal Rule of Civil Procedure 23. The default-judgment analogy also failed because creditors had no duty to respond to the opt-out opportunity, and default judgments are not entered when parties have no duty to respond.

Disposition

The court held that the releases were nonconsensual under both state and federal contract principles and therefore barred by the Supreme Court’s decision in Purdue. The United States Trustee’s June 2, 2025 appeal was granted. The Bankruptcy Court’s May 21, 2025 Confirmation Order was reversed, the third-party release and corresponding injunction were stricken from the plan, and the case was remanded for further proceedings.